Bilski Decision Could Have Serious Consequences for Software Patents

The current case of Bilski v. Doll, U.S., No. 08-964, cert. granted 6/1/09, pending before the Supreme Court, may have broad implications for software patents. While not directly dealing with software, the Bilski patent application deals with a process that some are calling too “abstract” to be patentable. The Bilski invention involves a method of managing risk in a commodities market. The steps of the process do not necessarily require software, a computer, or any other physical implementation, but are merely a series of steps leading to the desired result.

How might this impact software? When the Bilski case was heard by the Court of Appeals for the Federal Circuit, a test that is now commonly referred to as the “machine or transformation” test for patentability was resurrected from a previous U.S. Supreme Court patent case, Diamond v. Diehr, 450 U.S. 175 (1981),  See In re Bilski, 545 F.3d 943, 961-62 (Fed. Cir. 2008) (en banc). This test says that, to be patentable, a process must either be tied to a particular machine or must transform an article to a different state or thing. The Bilski process was deemed to be patent ineligible because it was not tied to a particular machine, nor did it transform matter in any way.

Now, the Patent Office and the courts are using Bilski to invalidate software patents that appear to be “tied to a particular machine,” namely, a computer. It has been a common practice to tie software process steps to a computer to render them patentable, especially since the Federal Circuit’s decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), which involved utilizing software to perform a calculation on a computer. The patentability of Bilski was argued to the Patent Office based on State Street, but the argument was rejected because the State Street process was performed using a machine (the computer), but the Bilski process required no computer.

However, the Patent Office’s Board of Patent Appeals and Interferences has upheld rejections of applications that specifically recite a processor for computer-implemented processes that may not necessarily be considered “business methods.”  For instance, the case of Ex parte Cornea-Hasegan, 89 USPQ2d 1557 (B.P.A.I. Jan. 13, 2009), decided earlier this year, recites steps performed by a processor. Nevertheless, the Board upheld the rejection based on Bilski, stating that “the recitation of a processor in itself . . . does not tie the process steps to a particular machine. In other words, the recitation of a processor does not limit the process steps to any specific machine or apparatus [and] fails to impose any meaningful limits on the claim’s scope. The recitation of a processor performing various functions is nothing more than a general purpose computer that has been programmed in an unspecified manner to implement the functional steps recited in the claims.” Id. at 1560.

This is scary stuff for software developers who have applied for patents and spent thousands on patent preparation and processing fees, not to mention those already having issued software patents who are afraid to litigate them for fear of invalidation. However, there have also been cases where the Patent Office has reversed rejections of similar claims, so there is a definite lack of consistency, at least at the Patent Office.

Where is the Supreme Court likely to lead us? Bilski is a big wake-up call to practitioners who should have realized that State Street never opened the floodgates to patenting processes that apply abstract principles even if a tangible result is obtained through the implementation of the principle. We can expect the Supreme Court to delineate how tangible that result must be for a process to adequately limit a claim that embodies an abstract principle to qualify as patent-eligible subject matter by not pre-empting the principle per se. The key to drafting a claim to a machine-based process that will survive future challenges is keeping in mind that the claim must not pre-empt a basic principle. In the interim there are still plenty of opportunities left on the table by the Federal Circuit to obtain business method patents, provided the applications and claims are carefully crafted to carve out a specific application of a basic principle without pre-empting the entire principle.